by user






University of Pretoria etd – Schoeman, L (2007)
Health care is extremely difficult in South Africa because it is one of the most highly
inflationary medical systems in the world probably equal the US. I haven’t seen any
system…so a word of caution to do PPP on an extremely large scale because if it were
less inflationary like in other countries then you would not have the problem. But since it
is, can you imagine the cost of caring for HIV positive person if you do it through a PPP?
(Picazo, 2005).
You know the more I think about it, we are making something of HIV/Aids, something
that it is not supposed to be. In my opinion HIV/Aids is by now a normal condition and
you cannot in my opinion divorce HIV/Aids from the rest of the provision of medical
services…… You must just say HIV/Aids is a primary health function and it must happen
there. An HIV/Aids program and patient will cost you on the long run a lot more. But a lot
of the treatment which the patient will require will be antibiotic, cough medicine… the
ARV part only comes in towards the end when full blown Aids is diagnosed
The accessibility of clinics depends on the community. It doesn’t matter if it is in the rural
areas or in urban areas (Pienaar, Venter & Maluleka, 2005).
The main issues, trends and patterns in the data with reference to the research question
are broadly discussed in this chapter. Options are therefore linked to trends and patterns
to provide for new and alternative approaches that solve the problem statement by
questioning the extent to which the overall strategic objectives have impacted on the rollout plan for HIV/Aids policies in South Africa.
On account of high uncertainties and risks that surround HIV/Aids, policy implementation
has increased the demands made on management’s ability to frame clear and welldefined strategic, operational and technical objectives. The strategic outcomes are
further complicated by changing perspectives in public management. The NPM
movement reshaped thinking and approaches taken in public policy-making and public
management which has significant consequences for public finance. With the NPM an
University of Pretoria etd – Schoeman, L (2007)
increased emphasis is placed on utilising public-private partnerships as a mechanism for
fiscal responsibility. Utilising public-private partnerships transforms the nature of
government functions and the role government plays in establishing quality service
outcomes. Gildenhuys (1997:46) recognises the importance of first coming to
understand different ideologies and how this influences the nature of government
functions before rational decisions can be made on recommending the best strategic
outcome and policy directives. This rationale formed the core determinant in overcoming
the threat that HIV/Aids posed for public finance and health care delivery in this study.
Literature indicates that by strengthening health policy capacity the government
improved its ability to deliver services more effectively, efficiently, economically and
equitably (4Es). Strengthening and building state capacity leads to improved
implementation of health care interventions in the national health care system. It
therefore requires increased investment in infrastructure development as well as the
provision of clinical and administrative systems. By considering the above actions, it is
believed that the government will be able to cope more effectively with the increased
demands placed on its health finance structures.
Value-for-money approaches support policies that are easily administered and take
account of the short-, medium- and long-term interests by enabling and providing
opportunities for sustained developmental issues. Figure 7.1 forms a template for the
following discussion of results on which the factors within the external and internal
environments were linked with concurrent government functions and overall strategies to
achieve best practice outcomes for NHS and HIV/Aids interventions.
University of Pretoria etd – Schoeman, L (2007)
Figure 7.1: Linking health and concurrent functions of government with overall
strategic outcomes in the NHS
External environment
Internal environment
Market success factors +
Distinctive competencies
Competitive advantage = Sustainable competitive advantage
Public and private health care
Line function
Staff function
Financial growth
Human capacity building
WTP & Quality
Competitive supplier
Regulation and control
Social welfare function part of
social development state
Health functions
Social security functions
Education and training
Support units
Supply programmes
Human resource
HIV/Aids interventions
Economic functions
Order & protection function
Market forces
Competitive advantage
Overall strategic
priorities =
Strategic intent +
Value proposition
Long-range plans
consistent with
Best practice
sharing synergies
accross strategic
business units (SBU)
Infrastructure and
service delivery:
Contractual &
Service agreements
Cornerstone of
actions: communal
instructions approved
in legislation and
Source: Adapted from Kaplan and Norton (2001:48); Roux, Brynard, Botes, Fourie
(1997:338); Gildenhuys (1997:24).
University of Pretoria etd – Schoeman, L (2007)
Discussion of international results (external remote environments)
Worldwide, health care reforms and the approaches taken towards HIV/Aids
interventions are strongly influenced by political institutional structures and market forces
that are driven by two global roleplayers, the United States and the United Kingdom. The
political ideologies of these two global roleplayers are a dominant force in the power
relationships that steer the process of globalisation and regional development. They
direct the positions that developing countries take within the world society and determine
the global trends that push development and transnational interaction which became a
determining factor in policy and how development initiatives are put together (Kennedy
et al., 2002:27). Their strategies guided by development theories are mainly influenced
by political preferences and ideologies which regulate outcomes of global and regional
economies. The impact of the power relationship between the developed and the
developing countries has a profound effect on the revenue structures of developing
countries, their available resources and the ability to cope with the increased demands
made on health care systems as well as the effect of spiralling health costs on their
budgets and their direct ability to cope with HIV/Aids.
Schumpeter stresses that competition is profoundly dynamic in character as the nature
of economic position is not in equilibrium but is driven by a motion of continuous change
(Porter, 1990:70). The importance of countries keeping their competitive advantage in an
industry such as “health markets” is thus centred on finding new markets and identifying
a need for new technology (Porter, 1990: 71; cf. Pearce & Robertson, 2003:85). At the
core of establishing competitive markets are international organisations and health
markets which set the tone for development (Lee et al., 2002:48; cf. Sen, 2003:45; cf.
Labonte et al, 2004:1). It is widely recognised that in economies of scale, technological
leads and the differentiation of products create positive conditions for trade that offer
advantages in exports and sustained development (Porter, 1990:33,70). Technological
superiority and the ability to produce more differentiated and higher-quality products are
key issues in the creation of health markets and in keeping the competitive advantage in
an industry. It is critical to understand that transnational organisations compete in
international markets and that it is these firms that create and sustain the competitive
advantage and explain the role the nation plays within the process (Porter, 1990:33; cf.
Hough & Neuland, 2000:34). Patent rights and intellectual property (TRIPS), profiteering
and shareholding place the developed countries in a bargaining position and provided
University of Pretoria etd – Schoeman, L (2007)
them with a competitive advantage which determined the costs associated with HIV/Aids
interventions (Lethbridge, 2002a:10; cf. Siplon, 2002:115; cf. AVERT, 2005a; cf.
AVERT, 2005b). Developed countries have adequate financial resources to develop new
treatments as well as adjust their health systems to cope with the increased demands
made on their budgets, infrastructure and support systems, taking HIV/Aids from a fatal
to a chronic condition. In contrast, the developing countries (low- to middle-income
countries) have inadequate resources, poorly developed public and private health care
sectors and 90% of HIV/Aids patients in need of care (Barnett & Whiteside, 2002:195; cf.
Siplon, 2002:134).
This meant that HIV/Aids has come to challenge traditional health care and economic
systems in both the developed and developing countries because even though the
developed countries have less patients, the costs and inabilities of the developing
countries to cope with HIV/Aids and health care have a carry-through effect on their
economies and health care systems. HIV/Aids emphasises the inadequacies and
differences between “rich (have) and poor (have not)”. Worldwide, it forced governments
into accepting responsibility for reducing poverty and all its social-related problems. The
Millennium Development Goals (MDG) became an instrument of sustainable
development for the developing countries in that it supported governance structures
which reduced social and economic inequities.
Literature indicates that efficiency improvements in health care are based on competitive
markets in which government capacity is regulated and the market is managed. Scaling
up of health interventions depends on strengthening the overall health care system. A
key success factor in answering health-related problems thus lies in service delivery and
the supply of goods. Currently, all health interventions in the developed countries are
built on and steered by supply-side economics which favours the wealthy in that the
fiscal policy encourages lower taxes and minimises the government’s presence in the
economy by putting the supply of money in the hands of business. Likewise, the supplyside character encourages expensive technology-driven and curative treatments in
which the bottomline is profits.
By forcing governments to take on more social responsibilities governments had to
reassess their role and the impact that ideologies and political preferences had on
University of Pretoria etd – Schoeman, L (2007)
budgeting processes and service delivery outcomes. This meant a shift away from the
supply-side economies towards the inclusion and balancing of demand-side factors. How
the supply and demand-side economies are utilised influences all government functions
as they are affected by the way revenue is raised and how public money is spent.
Distribution and allocation policies are executed through government budgets. Creating
a balance between the economic and social policy is critical for wealth creation and
physical well-being which are the underlying factors that determine successful outcomes
for HIV/Aids strategies. While the demand-side theory puts the cash in the hands of the
patient who is responsible to negotiate for more efficient treatment interventions, the
supply and demand functions set the boundaries for efficiency, competition and valuefor-money approaches. It should also be noted that policies implemented without
considering how they influence the entire system undermine the country’s competitive
advantage and have severe effects on economic growth and economic efficiency.
Public budgeting is about public policy. Fiscal policy involves the macroeconomic theory
and the achievement of economic growth by reducing and managing inflationary
behaviour. The inflationary behaviour of health care has a significant impact on the
development and design of organisational structures in health care, as well as the
growth of the private sector versus public sector.
Through the background study (Annexure A and Annexure B) it became apparent that
various governments coped differently with the burden that HIV/Aids placed on their
budgets (distribution and allocation) and expenditure pattern. Allocative efficiency
(efficiency in product mix) impacts on the capacity of the budget system to distribute
resources. The resources available for distribution are determined by government
priorities and the choice of intervention programmes in health care systems, social
security networks and economic sectors and how these interact with each other. No
fixed pattern or template is available as allocative efficiency, productive efficiency,
efficiency in consumption as well as administrative efficiency in health care differ in all
case studies investigated.
Comparing the intervention strategies and applying a timeline to the actions showed that
developing countries applied a similar type of policy interventions for HIV/Aids, as their
strategies were steered by the economic and political impacts of the developed countries
University of Pretoria etd – Schoeman, L (2007)
on the developing world. However, developed countries used extensive international
funding to solve HIV/Aids-related problems. Acceptance of these funds (UN
organisations) came with specific demands and requirements for policy structures which
could explain why similar trends in solving HIV/Aids-related problems were used in the
developing countries. Strategic interventions showed particular problems which included
the failure to integrate health services with the wider economic and social development
environment. However, all case studies experienced poor participation in their local
spheres. This could be contributed to the development of health care and planning
according to national targets that did not take cognisance of the local priorities, needs
and desires.
Available resources and capacity-building initiatives stood out as determining factors in
the design of effective strategies in each of the four countries investigated. By comparing
the intervention strategies that were used to develop roll-out plans for HIV/Aids policy
and health care systems, one saw that the strategic interventions and roll-out plans for
controlling the impact of HIV/Aids in the developing countries started much earlier than in
the developed countries. This happened mainly because HIV/Aids affected the
economies and available resources of the developing countries at a much earlier stage.
The approach to strategic interventions was initially based on improving the institutional
capacity based on the views of the WHO who considered HIV/Aids solely as a medical
problem. Later, a movement towards structural development (SAP) propagated by the
World Bank moved the developing countries towards strategic interventions that
recognised the socioeconomic impact of HIV/Aids on the economy and society. Progrowth policies emphasised strategic actions that encouraged good governance and
partnerships within the HIV/Aids environment. It highlighted the impact that individual
policies had in different contexts and called to attention the need for good governance
and accountability practices (McPake & Mills, 2000:813).
PPP became the dominant slogan of ideologies supported by contemporary
conservatism (libertarians) and propagated by the developed countries for improved
governance and development. Each case study was influenced by trends that shaped
health care interventions and how government perceived its role as enabler, facilitator
and regulator. The trends such as deregulation, delayering, decentralisation, reengineering, privatisation, accountability enhancements and technological developments
University of Pretoria etd – Schoeman, L (2007)
determined how governance and accountability practices were put together (Cooper et
al., 1998:29). The trends were further influenced by the relationship between the citizen
and state which determined how much emphasis was placed on the common good of its
citizens, the culture and religious practices which contributed to the characteristics of
government, the type of role the state selected to play in achieving well-being and how
government constructed its judicial and legislative measures.
Each of these trends were swayed by hidden assumptions that framed preconceived
ideas and ascertained how problems related to HIV/Aids were framed, the type of
strategies they supported in designing health care systems and governments’
operational definition of health care needs for its citizens. Improved health care and
education strategies dominated the political landscape within a model of constitutional
democracy. The competitive economic markets overruled and even steered political
philosophy and thinking. Hence, finding new and innovative ways to support
governments in putting together funding mechanisms that are able to cope with the
increased costs of service delivery shared by all sectors, is mostly driven by competitive
and economic market forces hinged on consumerism. The NPM movement encouraged
this trend by moving governments towards applying businesslike approaches in their
day-to-day practices.
Health care reforms became an integral part of the events and decisions that occur
within the political, economical and social fields. All health activities are intertwined in
some way with the outcomes and strategies applied to well-being in each of these fields.
In order for health care strategies to be successful, it became imperative that the
strategies had to identify the market success factors and strategic risks that influenced
its ability to provide sustainable and effective outcomes in service delivery. Risk
management is an integrative function of strategic management and requires that
strategic risk drivers (technical and programmatic issues) and strategic risk indicators
(cost and time schedules) have to be identified in order to be operationally effective and
efficient. The high levels of uncertainty and risk that surround HIV/Aids policy decisions
require that health and finance structures must be built to environments that can change
and adapt to the needs of the communities it serves. Health care becomes an important
instrument in achieving social development and a driver in realising sustainable
outcomes. Evidence from all four case studies showed that health care cannot stand on
University of Pretoria etd – Schoeman, L (2007)
its own as a separate entity. Well-being and “common good” are interwoven into all
aspects of life, and are determined by political philosophies and ideologies; economic
growth; empowerment and employment issues such as migration; the security needs
and gender issues, poverty and social dimensions of cultural practices and its influence
on savings and security needs of individuals and families; technological aspects;
legislative issues and human rights; and environmental issues such as agriculture and
nutritional needs and quality life expectancy (Qualy). Poverty is perceived as the
greatest threat to well-being. The MDG advises that poverty must be halved by 2015
which means that massive investments in the health sector are necessary to realise
each of these goals.
7.2.1 Developed countries
Political ideologies shaped the role of the state as well as the economic market and this
determined how welfare and health care reforms were approached. During the
ninteenth-century the expansion of economic forces changed the notion of the private
sphere and civil society. It came to challenge the integrity of the state (Schecter,
2000:37). Significant differences in approaches to welfare and health care during this
time became evident in both case studies. Case Study 1 showed a movement towards
equality of opportunity and social justice (a commitment to liberty and democracy and
sought to fuse liberal ideals with other ideologies such as democratic socialism) while
Case Study 2 moved away from the concept of social justice, supporting minimalist state
intervention (liberalism reformed into contemporary liberalism) and the Keynesian
concept in which the state managed capitalism by using its power to supply public
services with minimum economic and social inputs.
Evidence drawn from a historical study showed that the evolvement of health and social
reforms within the developed countries were framed within social welfare initiatives that
underscored poverty relief interventions and the development of health care initiatives.
The social dimensions that underpinned attitudes towards social welfare were framed
within an ideology of Christian charity which became the pivotal point from which social
state functions and activities grew. This allowed governments to put together welfare
structures that met specific needs, desires and demands of the citizens. The concept of
natural rights played an important role in the approaches social theorists attached to
political justifications. Evidence from the case studies showed that the type of welfare
University of Pretoria etd – Schoeman, L (2007)
structures each country supported depends on their political philosophies. These political
philosophies were shaped by major events in history. The Poor Law Acts, revolutions
and the Second World War were events that were recognised in literature to have a
significant impact on the evolvement of welfare structures in both case studies. The
Second World War and the period of industrialisation changed the role of the state in two
directions. On the one hand, the role of the state moved towards that of a provider and
care giver (social welfare model) that demanded heavily constrained public finances and
on the other hand, a residual welfare model developed in which the state supported
minimal state interference and rejected the social justice arguments entirely with an
emphasis on minimal public finance (Bailey, 2004:20). However, both countries
supported political, economical and social ideologies which moved the role of the state
into improving and developing better social conditions for the individual that defined and
supported “common good and well-being in health care”.
A major difference in health care outcomes was based on the amount of state
interference which determined the type of interventions the government used to
implement the distribution of welfare. While politics expressed the will of the state, the
administrative structures supported the execution of policies. Thereby public
administration provided a dominant base for practices and values that had to be pursued
with regard to good governance and the way powers are exercised. Values and
practices are deeply ingrained in the cultural practices and define the conduct of
democracy in both case studies.
A capitalist and market-orientated economy framed the government’s fiscal and
monetary policies and determined the size of the the public versus private sectors.
Stakeholders such as the multi- and transnational organisations which dominated and
played a very important role in the global economy were based on both case studies.
Pharmaceutical companies became powerful voices in health policy agendas as they
represented profitable incomes and are strong leaders in the economic activity. The
economic systems in Case Study 1 moved towards a shareholding capitalist system
while Case Study 2 moved towards a managerial capitalist system. The health systems
were strongly influenced by each system. The health system in Case Study 1 moved
towards primary care trusts (PCT) in which shareholding and partnerships underscored
relationships. Health systems in Case Study 1 were built on highly competitive and
University of Pretoria etd – Schoeman, L (2007)
inflationary management systems in which profits form the driving force. The difference
in approach influenced economic policies and thinking in public management and public
administration. This determined how each country saw its role as enabler in facilitating
conditions for economic growth and sustainable development as well as how social
goods and services are distributed.
7.2.2 Developing countries
The political ideologies of the developing countries were influenced by liberalism and the
Westminster-style parliamentary system (unitary characteristics). The Constitution
embodies the citizens’ rights and promotes cultural diversities in which traditions and
caste systems complicated the political environment. The ideologies of contemporary
liberalism and neo-liberalism shaped initiatives and development theories that were
applied within the developing countries. This is clearly evident in Case Study 4 where
government budgets comprised 58% of international aid of which the United States is a
major source of funding through the World Bank, International Monetary Fund and
USAID. Health care services are delivered to communities by national and international
NGOs (mostly mission facilities) which formed an integral part of the operating budget. In
an interview, Picazo (2005) stated that: “…this public-private thing is modelled in Africa,
which I have not seen in other countries…”
Because the Case Study 4 cannot cope with the health care demands made on its
budget, public-private partnerships amongst the public sector, NGOs and CBO formed a
core part of its health care system. Health care reforms are therefore devised in
response to public dissatisfaction. In the developing countries, the state encouraged
privatisation and corporatisation of medical care through incentives in an aim to make
government structures more cost-effective and leaner. This led to the state directly
neglecting public hospitals and public service.
As no policies or regulations guided health care reforms in the private sector, quality and
pricing turned medical care in a lucrative business that led to the creation of monopolies
in private health care. Profits and an absence of supplier-demand controls dominated
private health care and pushed costs of health care upwards. Pharmaceutical
companies developed partnerships with specialist hospitals that demanded expensive
curative treatments. A trend developed in each of the developing countries where poor
University of Pretoria etd – Schoeman, L (2007)
public health care and an absence of available resources required governments to seek
NGO collaboration in an effort to integrate health services with wider economic and
social development and achieve better participatory involvement at local levels.
Decentralisation came to play a vital role in achieving participation at local levels. The
developing countries were all faced by high levels of unemployment, a growth in poverty
and high demands on welfare structures with poorly developed economies and
infrastructure to support demands which resulted in an increased vulnerability amongst
women and children to cope with the socioeconomic effects of HIV/Aids on their wellbeing.
7.2.3 Comparison between capacity-building initiatives within health
reforms in the developed and developing countries
Available resources and capacity-building initiatives form the main determining factors in
the design of effective strategies. The foundation of effective strategies was based on
strategic competence (the strategic skills and knowledge required by a workforce to
support strategy that drives risk), strategic technologies (the information systems and
data bases required to support strategy) and the ability to create an environment for
action (administrative support and finance).
Kaplan and Norton (2001:75) state that a sustainable strategic position comes from a
system of activities in which each reinforced the other. Building capacity in health care
reforms and achieving sustainable outcomes in HIV/Aids and health care demand that
one recognises that the strategic position must come from a system of activities in which
positive or negative outcomes are reinforced down the line. Therefore, solving HIV/Aids
problems requires that policies must be integrated in the organisational and fiscal
systems used by governments. The main actions necessary to strengthen policy
implementation were consistent in all case studies investigated. However, the manner in
which the operational strategies were implemented differed as well as the time
schedules applied. A main constraint in achieving sustainable outcomes by building
institutional capacity within the developing countries was an absence of strategies that
dealt with human capacity development (skills). This affected the vertical and horizontal
co-ordination within the government sectors resulting in a reliance on partnerships and
the growth of monopolies and monopsonies outside the public health sector. Adding to
the negative effect of monopolies was the absence of policies and regulations from the
side of government that regulated the growth of public-private sectors.
University of Pretoria etd – Schoeman, L (2007)
Developing countries utilised a pseudo-PPP in which one saw a subvention of NGOs
and mission facilities financed by international aid organisations, while the developed
countries preferred to use BOT schemes which allowed the private sector to finance
service delivery in the provision of general health care (Picazo, 2005; cf. Muller, 2005).
BOT schemes encouraged private investment by the promise of profits. However, private
investment shies away from risk and uncertainty which is one of the core issues affecting
HIV/Aids environments. In discussions with Muller (2005), he pointed out that PPP are
found to be the most effective in areas where high profits are to be made. PPP are rarely
applied in rural areas where the customers are unable to pay.
Utilising PPP as procurement tool increased inflationary behaviour in the health care
sector of the developed countries, mainly because shareholding demanded continuous
growth in profits, forcing fees to rise. The escalating costs of health care in the
developed countries reduced capacity-building initiatives in the developing countries as
increased health costs diminished their ability to cope with the threat of HIV/Aids.
Likewise, the high costs associated with the treatment of HIV/Aids, poor return on
investment and its negative impact on the economy meant that “no PPP that dealt
specific with HIV/Aids” was found to be utilised in the developed or developing countries.
Various external and internal factors influence decision-making in the type of strategies
government selected to achieve fiscal responsibility in its approach to deal with HIV/Aids.
Reforms that dealt with capacity-building in the health care sector are closely linked to
microeconomic factors in which the focus is on the improvement of infrastructure and
skills development, while the health and wealth of the industry depends on the macroeconomy factors such as changing interest rates and its affect on individuals
(employment) and companies (growth). Due to the high costs associated with
infrastructure development and huge backlogs (both in developed and developing
countries), governments were forced to find alternative ways to fund these operations.
PPP and PFI were seen as attractive alternatives in the developed countries. PPP also
provided the developed countries (multinational organisations) with the opportunity to
finance projects in the developing countries and as such open up new markets for their
own economies.
University of Pretoria etd – Schoeman, L (2007)
PPP and investments brought major benefits to the developed and developing countries
of which investments in infrastructure development brought advantages to support
economic growth. PPP provided private investment through BOT schemes in which
service charges are repaid over long-term periods of 25 to 30 years through
concessions. It was considered that BOT schemes secured better value for money and
for this reason it became the preferred option to be utilised in the developed countries. A
reason for this trend is that instead of showing large amounts on their budget, costs are
converted into evolutionary costs (Muller, 2005). Instead of a once-off payment, the
government pays for the infrastructure and service delivery over the life-time (wholelife
cost) of the programme. This involves interest rates which go with NPV and ROI.
Regulating these costs in the budgeting process becomes extremely difficult and
demands high levels of skills in the workforce.
Lessons learnt by the developed countries (Case Study 1) showed that managing and
containing costs in PPP are extremely difficult as increased fees over long periods (25 to
30 years) impact on the expenditure budget. As the costs are not fixed and escalate,
depending on the type of service agreements, a situation develops in which government
budgets are burdened by payment of service agreements which started of cheap and
are becoming more and more expensive to cover profits and loan repayments. The
investments through PPPs (as a procurement tool) in infrastructure tend to grow out of
control if not managed properly as became evident in Case Study 1 (Economist
2005a:47; cf. Hyman, 2005:413; cf. Farquharson, 2005). Therefore, PPPs must be seen
as a procurement tool that needs highly skilled people who are able to manage the
process effectively (Farquharson, 2005).
7.2.4 International KPI and key issues that impact on HIV/Aids intervention
The development of HIV/Aids intervention strategies followed similar trends worldwide in
which capacity development was placed at the core of all strategic designs. What
differed was the fiscal mechanisms used by governments to achieve their goals. The
way in which fiscal mechanisms were utilised to support the activities in reaching
strategic goals and objectives depended largely on factors such as skills levels of
employees, the economic systems that supported the political and social environment,
the strength of the economy and its impact on tax and revenue collection and the
government’s ideology and approach to social justice. Each country applied different
University of Pretoria etd – Schoeman, L (2007)
linkages between health care and social security networks and how this was built around
supply and demand which influenced distribution and allocation policies in achieving a
“Pareto efficiency” (Barr, 1998:73; cf. Abedian et al., 2003:186; cf. Hillman, 2003:10).
Issues that influenced efficiency in health care and its application to HIV/Aids
responsiveness, fairness, equity and value for money (quality). Accessibility of services
is defined through an operational definition that depended on how the government
applies the concept “health for all” and how the government managed its strategic role
as an effective state in the provision of health care services through regulating, enabling
and facilitating opportunities. As indicated, the initial strategies took a top-down
approach in combination with vertical programmes that integrated HIV/Aids into the
budget process. Moving towards partnership programmes demanded a bottom-up
approach which meant a move away from the vertical programmes towards horizontal
programmes. As efficiency relates to interventions taken to improve internal efficiency,
accessibility and equity in preventative service delivery, it now required parallel shifts
that moved the government away from a focus on national targets towards strategies
that took an internal and comprehensive approach (Barr, 1998). The impact of this
approach entailed that HIV/Aids strategies are integrated into the NHS in which the focal
point is based on internal efficiency that determines standards for quality, fewer targets
with more emphasis on accessibility and responsiveness within the local spheres of
service delivery.
Partnerships are a determining point in the process of service delivery at the local
spheres. A shift to demand- and supply-side factors is central to the formation of
strategic interventions in partnership agreements. Demand-side factors in which the
patient as customer has more say in the decision-making process combined with choice
and quality form a balance against previous one-sided supply factors that dominated
health interventions. Government strategies support these actions by funding capacitybuilding initiatives that emphasise service modernisation, ITC development and
improvement through partnership agreements which strengthens the NHS in its goal to
improve service delivery in all the spheres of government. The main issues to be
addressed in health care reforms center around the controll of the growth in health care
spending and preventing health care from absorbing increasing shares of the GDP as
University of Pretoria etd – Schoeman, L (2007)
well as finding ways in which to improve the market efficiency for health care (Hyman,
7.2.5 The role of PPP within international health care reforms and HIV/Aids
intervention strategies
As governments became more comfortable with involving the private sector in long-term
solutions for public sector activities, the concepts on which PPPs were based reflected
the desire to sustain a close working relationship with external markets (Domberger &
Fernandez, 1999:29). PPPs were accepted as valuable tools that achieved value-formoney outcomes in the health care reforms because it offered access to market skills
and expertise, created new markets for products and services, improved quality in
service delivery, offered cost savings through competitive tendering and negotiations,
managed fluctuations in demands, provided access to technology and offered better
accountability mechanisms.
However, it was difficult to establish the real cost of managing a PPP relationship.
Domberger and Fernandez (1999:29) argue that the management costs of PPPs are
significant compared to management costs when it is kept in-house. This argument was
also supported in interviews, although it was felt that some countries that combined
PPPs with public works programmes were worse off as it became impossible to track the
costs of services (Farquharson, 2005; cf. Muller, 2005).
PPPs in international health care were about the procurement of health infrastructure
and not the clinical services. There was a definite difference between the applications of
PPP in each country. Case Study 1 used a narrow focus (neo-liberal) in that there is a
very definite political divide between health infrastructure and clinical services. PPP
focused specifically on the refurbishment of the health estate within the primary,
secondary and tertiary spheres of service delivery while Case Study 2 used a much
broader and different definition (contemporary conservatism) which is closely tied to the
ideologies and how government perceived its role in the delivery of health care
(Farquharson, 2005). No single focus was placed on HIV/Aids in any of the developed
countries. It was argued that by clearing infrastructure backlogs and correcting the health
system it will automatically correct and solve issues related to HIV/Aids.
University of Pretoria etd – Schoeman, L (2007)
PPP changes the strategic departure from the way the public sector used to function.
The transformation of the public sector from producer to purchaser changed the skills
sets of public servants. They operate in an environment of co-operative rather than
adversarial contracting which requires skills in contract management, performance
monitoring and liaison with stakeholders. One can conclude that the skills needed is not
so much focused on delivery as it is on being able to define and articulate very clearly
what the outputs are on behalf of the citizens. Service delivery is far removed from the
old production model of operation where the public sector providers determine service
delivery levels, employ staff necessary to produce them and deliver the service to the
end-user themselves. The complexities of service delivery used in PPP relationships
revolve around clearly specified expectations that are well managed through the whole
life of the relationship.
Discussion of national results (external and internal environmental
Westernised ideologies and practices influenced and shaped the national governance
systems and policy-making approaches. The roleplayers in global governance formed a
determining role in how case study five positioned itself as a nation-state and within the
world society (Kennedy et al., 2002:122; cf. Krasno, 2004:4; cf. O’Manique, 2004:44).
International relations are critical elements in the formation of partnerships between
nation-states and the transition from an industrialised society towards knowledge and
information (Porter, 1998:73; cf. Kennedy et al., 2002:30). The ability of a nation to
reduce its digital divide and transform into a competitive knowledge-based society
determines the success of regional development which impacts on stability and growth
within the economy.
Case Study 5 based its policies on a neo-liberal approach that supports market-driven
policies on trade, investment, employment and government spending. These policies
enhance a social developmental approach to service delivery which is framed within a
constitution and embraces democratic principles. As a middle income country the social
development policies revolve around “Poverty and Growth Programmes” placing a
strong focus on capacity-building within a market-driven economy. The social
developmental approach demanded increased social spending in functions such as
health, housing, education and social security networks which placed increased
demands on public finance as well as its ability to deliver services to the poorer
University of Pretoria etd – Schoeman, L (2007)
communities. Each of these functions is a critical element in balancing out the effects of
inequities. All of these functions work together to create poverty-reduction strategies that
empower communities (through economic efficiency and pro-growth policies) and
present more security and equity to communities (through the application of social justice
and balancing of distribution policies). Growing inequities and ill-regulated growth in
privatisation precipitates economic and political upheaval.
The socioeconomic impact of HIV/Aids on employment saw a strong relationship
between poverty and ill health. HIV/Aids impacts more on the unemployed and unskilled
labour category in the youth. Migrants are usually fairly young and typically in their
twenties or early thirties (Haour-Knipe & Rector, 1996:18). A strong correlation between
migrant labour, poverty and ill health became evident from the situational analysis.
The situational analysis identified migrant labour as both a major external threat/risk and
internal threat. Its impact as an external threat was based on reducing the market
success and sustainability of economic policy outcomes. Migrant labour internally
threatened the sustainability of distinctive competencies in health systems as well as
reduced the impact of value-creating strategies within health and thus negatively
influenced the outcomes of HIV/Aids strategies and the costs associated with building an
effective NHS. This directly decreased customer value and prevented operational
excellence in implementing HIV/Aids roll-out plans. Case Study 5 has positioned itself as
a strong leader in regional development. Evidence from Table 6.1 and Annexure H
showed that the country draws heavily on migrant labour from its neighbouring states to
support economic development especially in areas such as mining and trucking.
Considering that migrant labour is drawn from countries such as Malawi, Zimbabwe,
Mozambique, Botswana and Lesotho of which Botswana and Lesotho have the highest
HIV/Aids infections within the African epicentre, it should be seen as an external and
internal risk reducing the market success of health care interventions. The findings
presented in the Nelson Mandela Foundation report (2005) supported this overall trend
of migration in its National HIV Prevalence survey outcomes presented in December
2005. To minimise the threat that migrant labour posed through HIV/Aids required that
the political, economical, social, technical and legislative aspects must be integrated
within the development of alternative strategies and policies. This research study shows
that the government must focus on policies that slow the spread of Aids as well as the
University of Pretoria etd – Schoeman, L (2007)
demographic trajectory of the pandemic. Arndt and Lewis (2000:8) stress the need to
investigate the interactions between the pandemic and alternative growth and
development strategies. This meant that policies that support migrant practices must
focus on finding more creative ways to manage the spread of HIV/Aids from
neighbouring states, without having a negative impact on the economic policies and
regional trading relations.
The internal weaknesses and the compounded effect that migrant labour posed to the
successful implementation of HIV/Aids strategies increased the complexities associated
with public finance and its supporting administrative systems. Building a problem tree
through an effect-cause-effect analysis showed that migrant labour directly contributed to
shortages of skilled labour in all sectors of health care. The shortage of skilled labour
within the NHS mainly occurred due to movement of labour between the different sectors
as well as the movement of skilled labour from developing to developed countries for
higher salaries (Haour-Knipe & Rector, 196:31). The brain drain in all three sectors was
determined by issues such as job satisfaction, inadequate recognition for a job done
well, insufficient information to do the job well, active encouragement to be creative and
use initiative, overall satisfaction with the health sector and support level from staff
The loss of human and intellectual capital (brain drain) affected the sustainability of
health care initiatives and the costs of providing effective health care structures. The
growth of the private sector into a monopolistic situation is the result of inadequate
mechanisms that regulate the supply-side character of health care linked to medical
insurance (prepaid plans) and out-of-pocket expenditure (See Table 4.2). A conflict of
interest developed between the different sectors. This increased the competitive
tensions between demand and supply characteristics of health care (Abedian et al.,
2003:174). It also emphasised the need for horizontal policies which supported network
structures that made use of strategic alliances and joint ventures which resulted in
blurred boundaries (Roux & Schoeman, 2004:533).
Social development and the social model support “the right to health care” as basis for
strategic interventions towards a PHCS which stand in direct opposition of profit motifs
supported by a market-based economy. This aspect became a core issue that
University of Pretoria etd – Schoeman, L (2007)
continuously challenged the role and ideologies of the state and the desires of publicprivate partnerships. Profiteering, steered by supply-side characteristics increased the
costs associated with health care in the public sector. This happened due to the
increased complexities associated with the management of partnership agreements. The
complexities were associated with broader-based horizontal policies which challenged
traditional vertical authority structures in government systems and the design of
accountability and governance structures between the public-private sectors.
Strategies are not co-ordinated to achieve the best value-for-money outcome in the
HIV/Aids roll-out plans, and health care reforms lead to poor accessibility of clinics as
well as poorly co-ordinated and fragmented gras-roots intervention strategies in health
care. The PHC and DHC strategies are linked to continuous changes within an inflexible
health environment. This reduced the government’s ability to effectively roll-out HIV/Aids
strategies. A major weakness in creating an effective state was based on inadequate cooperation and communication between sectors and government departments. This
increased with the complexities of horizontal and vertical alignment of finances between
national and provincial spheres of government as well as intersectoral co-ordination
between governmental departments.
The impact of migrant labour on human resource management and its subsequent
impact on the strategic intent of HIV/Aids strategies become even clearer when the
internal weaknesses are measured against the operational processes, customer and
equality processes, innovative processes, regulatory and social processes. Human
capital forms the foundation and becomes the most important driver in achieving valuecreating outcomes and reaching the strategic intent. Information capital and
organisational capital are building blocks necessary to achieve quality in service delivery.
The strategic outcome of the roll-out plans for HIV/Aids is therefore strongly influenced
by the components and interrelationship that exist between the internal process
measures and customer value propositions in health. Utilising PPP as a strategic
measure necessary to achieve value creation in health and HIV/Aids is thus one option
available in building capacity in the long term. One can therefore conclude that the
outcomes achieved through utilising PPPs are linked to human capital and their ability to
use PPP as a tool in achieving economic efficiency and social justice.
University of Pretoria etd – Schoeman, L (2007)
7.3.1 The influence of NPM approaches towards strengthening
government policy capacity and improving service delivery
outcomes in health care and HIV/Aids interventions
The NPM movement guided the institutional reforms (Case Study 5) towards new
institutional economics that were based on concepts of public choice and simultaneously
emphasised managerialism. Under the NPM, institutional reforms encouraged
governance and sustainable development with a focus on 4Es that improved financial
responsibility. Public finance concentrated on strengthening efficiency, thereby
correcting negative economic growth towards positive economic growth with broader tax
bases. This complements the economic welfare state idea in that it allows for social
development initiatives that are encouraged through market-based approaches in the
budgeting and allocative processes. Public Expenditure Management (PEM) formed the
basis on which the PFMA, 1999 linked expenditure to measurable results. The
application of market-based approaches and the implementation of user fees not only
contributed to revenues and efficiency but also encouraged better synergy between
social services and NHS.
PPP, co-operation and relationships gradually replaced terminology such as
“competition”. Partnerships and particularly PPP became a dominant slogan in discourse
about governance and development. NPM advocated that PPPs were effective
development tools as it led to greater fiscal responsibility and encouraged
macroeconomic planning within the fiscal and monetary policy. This was recognised in
Case Study 5 and formed the core principles for the definition for PPPs as a mechanism
towards fiscal responsibility within the PFMA and the supporting Treasury Regulations. It
is therefore argued that PPPs offer the government an instrument to build institutional
capacity and develop organisational structures. Through the development of
infrastructure, the government became more comfortable to form partnerships in which
long-term market-based solutions strengthened the NHS. The value-for-money
approaches encouraged through partnership agreements between the NGOs or CSO,
private and public sector offered quick solutions to the huge backlogs that existed in
service delivery. Partnerships opened up new and innovative ways for the public sector
to utilise market-based approaches and to divide the burden of high costs between each
of the sectors to serve the government’s purpose in the best and most appropriate
manner. However, the utilisation of PPPs in health care proved to be a bit of an enigma
University of Pretoria etd – Schoeman, L (2007)
because of a resistance in health care to come forward with innovative approaches in
utilising PPP.
The design of the National Treasury’s PPP Manual and Standardised PPP Provisions
are founded on the PFMA, 1999 and Treasury Regulation 16. The PPP model proposed
in the PPP manual encouraged sustainable development and state efficiency according
to key economic strategies supported in the Gear. Ideally, PPPs brought with it efficiency
in economic growth, improved unemployment figures and reduced social security
spending, thereby building resilience towards HIV/Aids in communities. However, a
major constraint that prevented the successful achievement of both macro- and
microeconomic development in providing government with a competitive advantage
(through the effective use of PPPs in Case Study 5), was identified within this study as:
The negative impact that migrant labour practices had on the microeconomic
policies and its direct negative effect on reaching strategic outcomes in building
human capacity in health care.
The role that human capital played in establishing value propositions centred on
customer-centric business with support groups to meet the needs as efficiently as
possible (Boninelli & Meyer, 2004:73; cf. Kaplan & Norton, 2004:13).
The value human capacity creates for line management in that it becomes a
player more than a partner in supporting the long-range plans consistent with the
overall strategic priorities (Boninelli & Meyer, 2004:73).
Turnaround strategies had to focus on skills and infrastructure development as a driver
for accelerated growth. The accelerated and shared growth initiative (AsgiSA) replaced
the Gear strategy in 2006 (Ntingi, 2005:16). AsgiSA is designed to be a turnaround
vehicle that cuts down inflation and reduces the budget deficit by targeting the micro
economic reforms that extends and complements previous Gear strategies.
In the SWOT analysis (Annexure H), evidence pointed out that although the government
was able to strengthen its international and regional relationships, thereby increasing its
financial integration into the global economy and its competitive position within global
markets, the internal weaknesses had a significant influence on reducing its position of
power. Health is interwoven into the fabric of well-being which formed the pivotal point
on which development theories based its believe that effective outcomes in sustainable
University of Pretoria etd – Schoeman, L (2007)
development are increased through capacity-building strategies that are combined in
creating a balance between state-led, market-led and society-led methods of
7.3.2 Capacity-building initiatives within the NHCS
The PFMA 1999 provides a regulatory framework which regulates value-for-money
strategies in financing and provision of goods and services through:
Section 216 of the Constitution of the Republic of South Africa, 1996 in that it
provides for Treasury control.
Section 217 of the Constitution of the Republic of South Africa, 1996 as it
provides for procurement legislation (Pauw, et al., 2002:44).
The type of power balance between the citizen and public sector determines the method
of state interference, the degree of empowerment and the value propositions attached to
the intangible assets that drive service delivery outcomes towards value creation and
satisfaction. Equity in the distribution of health systems became a core determinant in
establishing effective strategies and sustainable outcomes in equity. Yet, priorities for
public expenditure focused on building capacity and a need to moderate consumption
expenditure and ensured that investment enjoys priority in the allocation of available
resources (National Treasury, 2006:101). Improvement of quality and efficiency of public
administration are main targets overall as well as in the NHS through major investment
in infrastructure improvement. These policy strategies are supported by strategies that
reduce poverty through various empowerment activities such as BEE which empowered
“black enterprise” and resolve the growing inequities between cultural groups. These
actions are further strengthened by core priorities to strengthen education and improve
productivity and the performance of the labour market, as well as implementing actions
that provide, expanded income security nets through stronger partnerships with the NGO
sector to build resilience in communities against the negative social effects of HIV/Aids.
Social protection forms a system which supports social advancement through improved
health and nutrition (National Treasury, 2006:103).
This process was started in the National Integrated Plan (NIP) in which the roll-out plans
for HIV/Aids strategies were built around an intersectoral plan that responded to
HIV/Aids interventions and is supported in the MTBPS and MTEF. These three
University of Pretoria etd – Schoeman, L (2007)
programmes were jointly organised into three streams of funding in which conditional
grants and equitable share became the main funding frameworks for these programmes.
However, building capacity within the public sector is influenced by seven assumptions
that prevent effective decision-making from occurring within the field of HIV/Aids. These
assumptions influenced the approaches that were taken towards health care reforms
and the way in which PPPs were utilised to build capacity within government. Evidence
showed a resistance against utilising PPP in health care and the HIV/Aids environment
as it was believed that PPPs did not achieve value-for- money outcomes for health care
but are instrumental to inflationary behaviour. It is further argued that the rigidity of the
PPP generic structure as defined under the PFMA and utilised in Case Study 5 seemed
unable to meet the needs of the health sector effectively as it focused on infrastructure
development alone. Although the DOH took into consideration affordability, risk and
accessibility in the design of infrastructure development (hospital revitalisation
programmes) they felt that the PPP model did not take a broader approach when it had
to be applied to the needs of clinical service delivery.
Added to this, continued conflicts between government and advocacy groups prevented
policy agendas to take coherent responses that satisfied all stakeholders, mainly
because the perspective on how to approach and frame HIV/Aids-related problems were
influenced by three streams of thought:
HIV/Aids is a biomedical problem in which medical bodies and legislation
facilitate core responses (strong influence of pharmaceutical companies and the
medical profession).
HIV/Aids is a human rights issue (Activists and human right groups).
HIV/Aids is a developmental and human rights issue (Government, NEPAD).
These thoughts are mostly driven by professional careers and depended on the
perspectives around which individuals framed their decisions. The medical profession is
strongly represented within the National Department of Health which means that
decision-makers prefer to utilise mechanisms that underscore medical practices and
preferences and support HIV/Aids as a medical problem. This caused major conflict in
the government sector as no consensus is formed in the DOH on the strategic intent and
the identification of value-creating strategies to support the strategic intent.
University of Pretoria etd – Schoeman, L (2007)
The seven assumptions identified in this study thus became major constraint in how
problems were defined and how solutions and possible options were selected towards
strengthening the NHS. Furthermore, the assumptions caused major constraints
between the views taken by the National Department of Health and the views taken by
National Treasury and the PPP unit in how PPP guidelines must be executed towards
achieving fiscal responsible outcomes in health care. The outcomes of the relationship
between the DOH and the National Treasury proved to play a major role in the
resistance to the utilisation of PPPs. The situation is exacerbated due to an absence of
skills within the DOH and their ability to:
Integrate policy-making.
Apply the influence of economies of scale on equity in health care.
Understand the role of public finance to achieve social advancement.
Expand their alliance with the PPP unit to align clinical interventions with
infrastructure development.
Gaps between strategic intent and internal value-creating
Wadee et al. (2004:10) state that the rigidity of the PPP model prevented approaches in
health care to go beyond the relationship of financing and provision. It is therefore
argued that regulations and institutional policy and procedures laid down in the PFMA,
1999 prevent efficient and effective outcomes of the delivery of clinical services. This
happened because of the complexities associated with the contractual relationship
between the three spheres of government which may involve various contracts between
parties asked for more flexible and rational approaches to contracting and the shaping of
finance agreements of public-private partnerships in PHC and DHC (McCoy et al.,
The perceived rigidity of PPP became more pronounced with the introduction of the
Health Act, 2004 which showed further impacts on health care reforms and strategies as
it underscored co-operation and shared responsibilities between the public and private
sectors within the context of national, provincial and district health plans. Fiscal
decentralisation and the building of administrative systems became important drivers to
support internal value creation in each of the spheres of government. The gap between
strategic intent and value creation widened as administrative actions supported political
University of Pretoria etd – Schoeman, L (2007)
decisions in their strategies for raising and spending public finances. The administrative
actions are built on accountability, efficiency and effectiveness which are actions that
presuppose an increase in the internal value of health strategies. The draft document of
the Health Charter set out to initiate actions that acknowledged that PPI should be
included within the scope of the PFMA Act, 1999 as they believed that PPIs contributed
to the overall sustainability of the NHS. The draft Health Charter facilitates
transformation in the following key areas; accessibility, equity, quality and BEE that
formed core issues in capacity- and institutional building strategies.
In the health sector, the discrepancies and failures of the market are accentuated
through the growing inequities in health care. Muller (2005) pointed out that: “...For
some reason the demand- and supply- is not working so you must empower the other
side. It seems to me that the power lies in the hands of the hospitals and the balance of
the power need to be shifted so that the chain on the other side, on the demand side
gets empowered…”.
His statement was supported in a discussion with Picazo (2005) who indicated similar
constraints and proposed that: “…What some of us in the World Bank are thinking is we
have discussed this issue from the supply-side, completely from the supply-side. We talk
about facilities and services. What if we attack the problem from the demand-side?”
Balancing the supply and demand factors and its immediate impact on the distribution
and allocation policies relate directly to the GDP which indicates the relative size of the
public and private sectors (Visser & Erasmus, 2002:27; cf. Abedian et al, 2003:185; cf.
Bailey, 2004:17). Managing and balancing outcomes of economies of scale are major
factors in regulating inequities in health care and the Department of Health becomes the
primary roleplayer in managing the supply of goods and services. This aspect becomes
crucial in the management of public finance in which the budgeting process is influenced
by the Annual Budget Act, DORA, the PFMA, tender legislation and preferential
procurement legislation. The combination of all these factors results in effective
macroeconomic planning in which government is able to manipulate the functioning of
the market together with its financial management systems, procedures and controls and
as such strengthen the NHS. One has to keep in mind that the management of inequities
is characterised by complex interdependencies that have second-, third-, fourth-, or fifthorder effects on any of the other policy dimensions which complicates decisions and
University of Pretoria etd – Schoeman, L (2007)
policymaking (Landsberg, 2002:1). Inequities are thus not only based on economies of
scale (public and private) but also exist similarly between black and white, male and
female, medical professions and other professions such as public administrators,
Gauteng and Limpopo.
The role of PPP as a fiscal responsible mechanism within the
NHS and HIV/Aids
Allocative efficiency refers to the capacity of the budget system to distribute resources
according to government priorities and programme effectiveness within the three
spheres of government. Social development challenges are based on achieving
economic growth, broadening participation and accelerating the pace of social
advancement. The main aim of the policy priorities is to reduce the growing disparities
and inequities that occur in service delivery and income distribution. Currently, the
country faces economic prosperity and an economic growth to average 5 % over the
medium-term expenditure framework (National Treasury, 2006:1). This means that the
faster the growth of GDP the lower the GDP ratios are (public expenditure/GDP ratio,
public sector borrowing/GDP ratio and public sector debt/GDP ratio) while tax revenueto-GDP ratio increases (Bailey, 2004:70; cf. Hyman, 2005:413; cf. National Treasury,
2006:45). Public sector borrowing/GDP ratio has decreased as the debt service costs
continue to decline (3.3% in 2005/06 to 2.7% in 2008/09) (National Treasury, 2006:44).
The influence of the rise in economic activity therefore has a positive impact on GDP
ratios as more money becomes available for social advancement in this period of
economic growth.
The policy priorities highlighted in the National Treasury’s (2006:3), “Budget Review
2006” encourage this process by following an expansionary trend in which an
acceleration of public expenditure contributes to strengthen economic growth. The
importance of this process is emphasised by adding additional funding totalling R372
billion over the MTEF period of 2006/07. These initiatives of government are based
within economic infrastructure development, education and health care developments. In
analysing the relative scale of public finance, Case Study 5 showed a shift in social
service expenditure towards quality improvement in education, health care and povertyfocused community development supported by social security networks that form the
main drivers in reducing the threats that HIV/Aids poses for public finance. Liberal
theories and the concept of social justice that underlines social development initiatives
University of Pretoria etd – Schoeman, L (2007)
regard capitalism as more efficient (market-driven) than any other system although it has
major costs in terms of poverty and inequities (Barr, 1998:48). Utilising PPP as a social
development tool, the government is able to correct the costs in terms of poverty and
increased inequities.There are many sources of public finance. Taxation is seen as the
main source of public finance and governments tend to neglect other sources available
to them. A preoccupation with strategic issues has led to the neglect of finding
alternative and creative ways to raise and spend public finances. Often, public spending
intended to create greater equity leads to frustration if the raising of public finance
creates considerable inequities (Bailey, 2004:131). Also, spending public finance and
identifying potential benefits of public expenditure in health care and HIV/Aids offset
potentially large direct and indirect costs of raising public finance, which has to be
brought into consideration.
The government increased its public expenditure in the Budget of 2006 whilst reducing
its public expenditure/GDP ratio by ensuring that there are extra public expenditure
levers in additional private sector expenditure through the establishment of highly
productive public sector investment in human and physical capital (PPP model). The
NGO sector supports government investment in infrastructure development (human and
capital investment) in terms of public expenditure in the Budget of 2006 in the rural and
poverty stricken areas as it is found that the PPP model is only effective where profits
are to be made. The balanced use of public, private and NGO investment in sectors
provide the best value for money and becomes a main objective. By utilising PPPs,
public expenditure leads to a rise in GDP greater than the monetary value of that public
expenditure, as well as to subsequent increases in tax revenues derived from the
increased incomes and profits facilitated by economic productive investments (Hyman,
2005:413). For the ratio of public expenditure to remain stable the GDP must rise by at
least the rate of increase in public expenditure and matched by private expenditure. The
generic PPP model (Figure 6.2) supports this approach. Fiscal trends indicate that over
a three year-period a growth in general government consumption will decelerate as a
result of lower expected inflation. Keeping inflationary behaviour under control means
that interest rates remain stable. The overall management of procurement through PPPs
are determined by the way in which interest rates influence borrowing and debt costs for
all stakeholders involved. As long as the economy shows growth, PPPs are a viable
University of Pretoria etd – Schoeman, L (2007)
option in funding strategies. The picture changes when economic growth declines and
interest rates increase.
Discussion of the utilisation of PPPs in roll-out plans for HIV/Aids
Benchmarks established the following evaluating criteria (4Es) and highlighted the
options and its effect on service delivery outcomes in the development of roll-out plans
for HIV/Aids interventions tied to neo-liberal ideologies and a mixed economy:
Effectiveness: Increased public expenditure in infrastructure, education, health
and social development through the utilisation of PPPs limit markets’ maximising
behaviour. The social development focus dealt with the key issues in HIV/Aids as
an integral part of the health care system thereby strengthening the NHS through
improved quality and cost-reduction strategies.
Efficiency: PPPs modify the market efficiency by facilitating employment
opportunities (identified in the feasibility and CBA), improving investment and
modifying inefficient markets. Removing barriers to economic growth caused by
market failures and reducing inequities, not only between public, private and
NGO sectors, lead to market efficiency. If the opportunity costs of free public
services (delivery of free health services to children and pregnant women) are
greater than their benefits then economic and social welfare are not maximised.
Economy: PPPs put government in an enabling role in which it pursues equality
through modified markets and a fiscal planning at macrolevel in which a
regulatory role enforces specific operational standards through regulations,
institutional policy and procedures.
Equity: PPPs emphasise empowerment through equality. BEE is an integral part
of PPPs’ wealth-creating structures. Reducing inequities through empowerment
and pro-poverty-reduction strategies must encourage practices that counteract
free riding or spending behaviour in which social benefits are made conditional
upon the recipient undertaking vocational training or subsidised employment.
GDP rises in both cases. The draft Health Charter enforces and regulates the
process in health care sectors by utilising PPIs.
PPPs are seen as mechanisms that improve performance which directly impacts on
value creation in the long term. These key issues are highlighted in Table 7.1 and show
the effect of the utilisation of PPPs on the public sector and on public finance.
University of Pretoria etd – Schoeman, L (2007)
Table 7.1:
The impact of PPP on the public sector and public finance
Evaluating criteria towards utilising PPPs as value creators in the
application of strategies
Applying the social model in a social development approach led to a heavily
for the
constrained state that demanded new and alternative approaches in funding the
growing numbers of people who are living with HIV/Aids as well as taking into
consideration the growing disparities between rich and poor. PPP did provide
alternative ways in which to fund the immediate needs and interventions required
through infrastructure and offered solutions that had to be managed over a long
contractual period (concession). These funding mechanisms required a strong
administrative support system (central bureaucracy that can deliver) and highly
educated workforce that must understand the workings of the public, private and
NGO sectors. Skilled human capital formed the core element within the
administration, management and steering of the PPP programmes. Without
skilled human capital, PPPs were ineffective, poorly structured and did more harm
than good.
Poor intergovernmental relations and an absence of adequate skills resulted in
increased resistance against utilising PPPs. The HIV/Aids environment made
extensive use of partnerships agreements but did not use PPP as a solution for
service delivery (value for money, affordability and risk) mostly because HIV/Aids
was separated from the NHS when issues such as prevention, treatment and care
were resolved.
The enabling role of the state creates heavily constraint finances. Through PPP
for public
interventions, costs are spread over a period of time (instead of a once-off
payment and big investments) shared with partners by encouraging economic
efficiency and growth. PPP is not a substitute for government capital spending but
does offer an alternative means to develop infrastructure in areas that attract
significant amounts of private investment. The development of infrastructure in
health care (hospital revitalisation, building of new hospitals and equipment)
provide the most profitable outcomes for the private sector.
Unfortunately, not all clinical services are profitable in health care. The PPP
enhances service delivery in areas where private investment is a viable option.
Partnerships with NGO sectors become a viable option when service delivery is
not steered by profit motifs alone. Government then carries the costs which it
shares with the institutional and human capacity of the NGO sector.
Source: Own (2006).
University of Pretoria etd – Schoeman, L (2007)
The ultimate objective of establishing benchmarks was to identify best practices and best
value for money in performing activities in health and HIV/Aids. It was concluded that the
internal capabilities (distinctive competencies) tied to PPP increased risks and
weaknesses in the health care system which will be exacerbated in the HIV/Aids
environment. The main driver in the HIV/Aids environment is service delivery with no
profits because health care interventions are based in an environment that alleviates the
outcomes of poverty reduction.
7.4.1 Developing criteria for a “best practice model”
A framework in which criteria for a best practice model was developed, was used to
measure the utilising of PPPs as a fiscal responsible mechanism and thereby putting
forward alternative policy options in health care and HIV/Aids. Lowering the costs in
reaching for value-for-money outcomes that are linked to excellence in performance and
value creation in the long term, (measured within a framework of 4Es) set forth key
issues that provided a framework for best practices.
Two instruments displayed the best options and strategies available to overcome the
weaknesses in the NHS: first, a situational analysis identified value-creating strategies
through the utilisation of PPP and its impact as a performance driver. Secondly, the CBA
determined the impact of value-for-money/value-creating strategies on future roll-out
plan for HIV/Aids (Figure 6.4).
From the analysis it became clear that:
The short-term financial objectives for cost reduction were tied to long-term
objectives of possible revenue growth in the application of PPP.
organisational capital) are critical elements in achieving quality and efficiency in
the service delivery outcomes. The three strategic linkages determine the growth
and performance outcomes necessary to built capacity within government.
Internal processes have the greatest determining impact on the success of rollout plans as this determines the maximum leverage for delivering value to
customers, shareholders and communities. The human capital, organisational
capital and information capital together form critical elements in achieving
University of Pretoria etd – Schoeman, L (2007)
successful outcomes in PPPs. The current PPP model utilised by the government
does not deal with these three elements as key issues in its KPIs, instead it
focuses on efficiency in the delivery of infrastructure with a somewhat low-level
focus on human capital.
The social cost-benefit analysis used in Figure 6.4 linked the effect of improved
efficiency in public investment with policy-making and its impact on future value creation
for health care and HIV/Aids strategies. In order to strengthen the NHS, evidence drawn
from the CBA (Figure 6.4) indicates that by utilising BOT schemes in health care
demanded a refocus of the approaches used to encourage investment in clinical
services. Human capital becomes a key issue in strengthening the NHCS. The alignment
of human capital with organisational and information capital investments is a critical
success factor in achieving successful outcomes in health care.
However, implementing each of these investments as part of the budgeting process tied
to PPP complicates the management of BOT schemes. This is further complicated by
the rigidity of the generic PPP model as well as the fact that the PPP unit at the National
Treasury sees operations and infrastructure as separate entities and does not take a
comprehensive approach to strengthen capacity-building initiatives in operations
(enhancement and maintenance). Further joint ventures, purchased services and outsourcing of clinical services do not meet the criteria for PPP. Therefore, not all health
interventions that fall within this scope are considered to be PPP interventions.
The resistance of DOH to use PPPs, led towards a separation of PPPs and PPIs. This
situation developed because the PPP model was only effective when profits were to be
made and the private sector was interested to invest in public service delivery. Major
gaps developed in health care as the majority of needs were focused on areas that were
unprofitable. It has become clear throughout the study that PPPs are valuable tools and
contribute towards building capacity through shared capital investments and in achieving
fiscal responsibility throughout government. Instead of constructing an array of
mechanisms without understanding the needs and constraints in the systems, it
becomes imperative to evaluate existing structures and the benefits that each provide
and how they can be used together to provide the best possible outcomes. This should
be seen as a challenge and an opportunity to improve the current PPP model. PPPs are
University of Pretoria etd – Schoeman, L (2007)
complex tools that require complex management structures and demand high skills and
proficiency levels of management which become even more complicated when PPP is
applied within the decentralised health structures. PPP has not proved itself within the
health sector as a fiscal responsible mechanism, mainly because its generic structure is
not designed to meet the specific needs of health care. The concepts behind PPP as a
fiscal tool for strategic development are sound, but its focus is to narrow to meet the real
needs of health care. This is increased by emotional disputes and tensions between
supply and demand functions which directly link to distribution and allocation
mechanisms. The growing inequities in health care are directly linked to economies of
scale and the relative size of the public and private sectors. Poor design of supply and
demand functions tied to inadequate interventions results in systems that support the
growth of inequities. The inability to see the interdependencies and links between
supply- and demand-side factors and how it is intertwined with the distribution and
allocation mechanisms of government increases the risk of applying PPPs in health care.
It is concluded that PPPs are valuable tools that contribute to capacity building through
shared capital investments that improve performance and value-creation over the long
term. By uitilising PPPs as a development tool, government is able to correct the costs in
terms of poverty, inequities and inequalities in health care. As long as the economy
shows growth and inflationary behaviour is under control, PPPs are considered to be a
viable option in achieving responsible funding strategies. Human capital, organisational
capital and information capital together form critical elements in achieving successful
outcomes in PPPs. Unfortunately, the current PPP model utilised by government does
not meet or align these three elements. Instead the PPP model focusses on efficiency in
delivery of infrastructure with a low-level focus on human capital. This becomes a core
issue in the design and structure of PPPs in health care, creating major gaps in service
delivery. These flaws in the design and structure of PPPs have resulted in a strong
resistance from DOH to use PPPs, mainly because the model does not meet the human
capital needs, organisational needs and information capital requirements for building
effective health care systems.
The conclusions drawn from Chapter seven are not expected to produce solutions, but
provide information and an analysis at multiple points. Finding alternative policy
University of Pretoria etd – Schoeman, L (2007)
strategies (macro- and microenvironment) that enhance efficiency and effectiveness in
service delivery by utilising a PPP as a mechanism to encourage fiscal responsibility is a
complex issue, as policy strategies do not operate in a vacuum. Social developmental
challenges are closely tied to economic growth and demand the broadening of
participation and acceleration in the pace of social advancement. The selection of
initiatives for social advancement is based in economic infrastructure development,
education and health care developments.
The next chapter provides a summary of the main results and draws conclusions of the
constraints and the gaps in the health system and PPP. Recommendations towards a
“best practice model” provide information to decision-makers in how to achieve valuecreating strategies and the best options for HIV/Aids intervention strategies.
Fly UP